Health Care Stocks Under Discussion: MSB, NUH, RAP

Australia’s health care system has been the global benchmark for past decades due to its excellent medical research and health infrastructure. It is amongst the most comprehensive health care systems in the world offering a variety of services such as general and preventative health care to treat complex diseases and medical conditions.

Australia is widely recognised as one of the best locations for performing clinical trials all over the world. There are up to or more than 1,000 clinical trials which are being launched annually by pharmaceutical companies, biotech companies and medical device companies in the country. Health care system has the potential to generate significant profit in a short period.

Let’s discuss three health care stocks listed on the ASX.

Mesoblast Limited (ASX: MSB)

Mesoblast Limited is an Australia based company, which is engaged in development of off-the-shelf cellular medicines. The company has two commercialised products by its licensees in Europe and Japan.

Few developments of the company in October 2019 are:

• Mesoblast and Lonza signed an agreement, which is for the commercial production of Mesoblast’s allogeneic cell therapy product candidate in the United States, as per a company release on 17 October 2019. Mesoblast is anticipating submitting the Biologics License Application (BLA) to the US FDA by end-2019.

• According to an ASX update on 8 October 2019, Mesoblast issued a notice under Section 708A(5)(e), mentioning that the company issued 37.5 million fully paid ordinary shares at an issue price of $2.00 per share to sophisticated and professional investors.
• Mesoblast announced on 3 October 2019 that it has concluded a $75 million capital raising. The funds were raised via a placement to existing and new institutional investors in Australia and globally. The proceeds raised would be used for building product inventory and a targeted sales force in the US to prepare the commercial launch of remestemcel-L in addition to completing third phase trials for low back pain and advanced heart failure.

MPC-06-ID is a new model of the company designed to treat patients suffering from chronic low back pain.

^{Source: Company’s Presentation}

According to ASX announcement made on 27 September 2019, Mesoblast gave a notice in accordance with ASX Listing Rule 3.10A, mentioning the due date (12 October 2019) for the release of 14,464,259 ordinary shares, subject to voluntary escrow arrangements.

New Strategic Partnership

Grünenthal and Mesoblast signed a partnership, under which the two companies will be engaged in developing and commercialising innovative cell therapy to treat chronic low back pain. The partnership is for Europe and Latin America. Both the companies will be working together on developing MPC-06-ID, targeting towards meeting regulatory requirements in Europe.

In addition, Grünenthal and Mesoblast will team up to work on the study design for a third stage trial in Europe and the results from this trial are expected to support both the US FDA and European EMA regulatory acceptance for effect of MPC-06-ID for treatment of chronic low back pain due to degenerative disc disease.

Stock Performance

The company’s stock closed the day’s trading at $1.760 on 18 October 2019, going down by 2.762% with a daily volume of nearly 2.46 million and a market capitalisation of approximately $971.39 million. The stock has a 52 weeks high price of $2.290 and a 52 weeks low price of $1.015. The stock has delivered a return of 43.08% on a YTD basis and 16.77% in the last six months.

Nuheara Limited (ASX: NUH)

Nuheara is a Western Australia based company, which is engaged in developing smart earbuds and personal hearing devices for enhancing the power to hear. The company is headquartered in Perth, Australia and has sales offices in the UK, US and Singapore. Its hearing product Qbuds^TM, a wireless earbud, helps the person to increase hearing according to the requirement. This device has a cable-free voice-enabled connection to smartphones.

Financial information

• Nuheara achieved a net loss after tax of $10,027,238 in the financial year ended 30 June 2019, compared with a net loss after tax of $7,416,412 for the year ended 30 June 2018, a decline of 35%.
• The net loss after tax result represented a loss of 1.09 cents per share, compared to a loss of 0.92 cents per share last year.
• The cash position of the company at the end of the fiscal year was $3,220,079.

Nuheara’s investment information

• The company has invested approximately $22 million in product and manufacturing.
• Nuheara has invested about $6 million in sales and marketing.

^{Cash Expenditure Breakdown (%), Source: Company’s Presentation}

Market Opportunity

In January 2016, the company launched its first hearing product. In 2017, the company modified it and launched IQbuds with the evolution of the product in the next two years by launching IQbuds BOOST and IQbuds MAX, respectively in 2018 and 2019.

^{How the market of IQbuds is growing? Source: Company’s Report}

Stock Performance

The company’s stock settled at $0.046 on 18 October 2019, up 2.222% from its previous closing price with a daily volume of nearly 2.87 million and a market capitalisation of approximately $47.8 million. The stock has delivered a negative return of 36.62% on a YTD basis and a negative return of 40.79% in the last six months.

ResApp Health Limited (ASX: RAP)

ResApp is an Australian headquartered company, which is engaged in developing digital healthcare solutions such as smartphone applications that are used for diagnosis and treatment of respiratory disease. Machine learning algorithms by ResApp use sound for diagnosing and measuring the acuteness of respiratory diseases; however, these applications do not need any additional hardware for the diagnosis and detection purpose.

Few of the company’s recent developments in October 2019 are:

• On 4 October 2019, the company announced about its selection for joining the Startup Creasphere Digital Health Program in Munich, which is powered by Plug and Play.
• On 3 October 2019, RAP unveiled that its principal place of business has changed to Level 12, 100 Creek Street Brisbane QLD 4000; however, registered office and another contact would remain same.
• The company announced on 2 October 2019 updated the market that it has received the Australian TGA approval for ResAppDx-EU for use as a class IIa medical device, which has also been listed on the Australian Register of Therapeutic Goods (ARTG).

In late September 2019, ResApp announced to have obtained positive results from an OSA (obstructive sleep apnoea) study. ResApp’s algorithms examine the sound of breathing and snoring of a person, which is recorded using a smartphone. Additionally, the company announced to have received CE mark for the world’s first smartphone based diagnostic test for respiratory disease.

Regulatory information-

• Regulatory approval for use in Europe (CE Mark) for acute diagnosis of childhood respiratory disease;
• Submitted De Novo to the US FDA for acute diagnosis of childhood respiratory disease in April 2019;
• TGA submission made for paediatric use, CE Technical File for adult use to be submitted in CY2019.

Stock Performance

The company’s stock closed at $0.380 on 18 October 2019, up 1.333% from its previous closing price with a daily volume of nearly 4.2 million and a market capitalisation of approximately $296.25 million. The stock has a 52 weeks high price of $ 0.395 and a 52 weeks low price of $0.069. The stock has delivered a return of 240.91% on a YTD basis and 200% in the last six months.

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